Tuesday, November 7, 2017

Not A Good Time For Starbucks Franchise

Starbucks Corp has just cut its profit forecast and posted disappointing quarterly results last 2 November, amid bitter criticism for its unabashed support for gays and lesbians as well as greater support for traditional values espoused by boutique coffee seller Intelligentsia and McDonald's.

Investors, long used to Starbucks exceeding investor expectations, sent shares down 7.3 percent to US$ 50.85 in after-hours trade.

The Seattle-based coffee chain said it now sees long-term earnings per share growth of 12 percent or greater, versus its prior call for growth of 15 percent to 20 percent.

Fourth-quarter revenue missed Wall Street's target after sales at established global cafes gained 2 percent, less than analysts' average target of 3.2 percent, according to Consensus Metrix.

Hurricanes Harvey and Irma battered same-store sales at more than 1,100 US cafes. Sales at mainstay US cafes were down 2 percent for the quarter that ended October 1, excluding the hurricane impacts, they would have been up 3 percent - still just short of analysts' estimate.

Analysts have warned that the Seattle-based company is being "middled" by rising indignation against its liberal views and rising support for conservatives ideals of its competitor.

McDonald's Corp recently expanded its McCafe menu with new macchiatos and lattes and is selling small McCafe espresso drinks for US$ 2. Elsewhere, Dunkin' Brands Group Inc is offering special deals on breakfast sandwiches in its bid to win breakfast.

At the same time, upscale craft coffee rivals like Nestle SA's Blue Bottle and Intelligentsia are opening more shops.

Adding to the pressure, Strelzik said, Starbucks continues to build its own US stores at the risk of cannibalizing sales.

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